Re:Forget Wall Street, worry about fintech
by paulpauper on Wednesday October 11, 2017 @04:26PM
(#15453152)
how did this even get upvoted to the front page
These financial technology (or “fintech”) markets are populated by small startup companies, the exact opposite of the large, concentrated Wall Street banks that have for so long dominated finance. And they have brought great benefits for investors and consumers. By automating decision-making and reducing the costs of transactions, fintech has greased the wheels of finance, making it faster and more efficient. It has also broadened access to capital to new and underserved groups, making finance more democratic than it has ever been.
But revolutions often end in destruction. And the fintech revolution has created an environment ripe for instability and disruption. It does so in three ways.
First, fintech companies are more vulnerable to rapid, adverse shocks than typical Wall Street banks. Because they’re small and undiversified, they can easily go under when they hit a blip in the market. Consider the case of Tokyo-based Mt. Gox, which was the world’s biggest bitcoin exchange until an apparent security breach took it down in 2014, precipitating losses that would be worth more than $3.5 billion in today’s prices.
Lehman, Bear, Aig failures were in the hundreds of billion, even trillions..these are a few billion, tops.
Betterment and Wealthfront are pretty much just index fund clones.
These financial technology (or “fintech”) markets are populated by small startup companies, the exact opposite of the large, concentrated Wall Street banks that have for so long dominated finance. And they have brought great benefits for investors and consumers. By automating decision-making and reducing the costs of transactions, fintech has greased the wheels of finance, making it faster and more efficient. It has also broadened access to capital to new and underserved groups, making finance more democratic than it has ever been.
But revolutions often end in destruction. And the fintech revolution has created an environment ripe for instability and disruption. It does so in three ways.
First, fintech companies are more vulnerable to rapid, adverse shocks than typical Wall Street banks. Because they’re small and undiversified, they can easily go under when they hit a blip in the market. Consider the case of Tokyo-based Mt. Gox, which was the world’s biggest bitcoin exchange until an apparent security breach took it down in 2014, precipitating losses that would be worth more than $3.5 billion in today’s prices.
Lehman, Bear, Aig failures were in the hundreds of billion, even trillions..these are a few billion, tops.
Betterment and Wealthfront are pretty much just index fund clones.